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Identifying a lease

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Identifying a lease

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by Stephen Widberg.
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  • January 8, 2021 at 10:53 am #605262
    Noah098
    Member
    • Topics: 935
    • Replies: 352
    • ☆☆☆☆☆

    “Coffee Bean enters into a contract with an airport operator to use some space in the airport to sell its goods from portable kiosks for a three- year period. Coffee Bean owns the portable kiosks. The contract stipulates the amount of space and states that the space may be located at any one of several departure areas within the airport. The airport operator can change the location of the space allocated to Coffee Bean at any time during the period of use, and the costs that the airport operator would incur to do this would be minimal. There are many areas in the airport that are suitable for the portable kiosks.
    Required:
    Does the contract contain a lease?”

    initial sentence of the Answer:

    “The contract does not contain a lease because there is no identified asset.”

    Sir with regards to the aforementioned question and the answer,I had a doubt.
    Clearly the part of airport space is an asset for Coffee Bean(as there is going to be future economic benefits from it and its cost to coffee bean can be measured reliably), so why do we say that there is no asset? A reasoning that the airport operator has the right to substitute the asset at any point in time, is valid enough reason to strike out the deal as a lease, but not that there doesnt exist an asset only in the first place.

    January 8, 2021 at 11:11 am #605265
    Stephen Widberg
    Keymaster
    • Topics: 11
    • Replies: 2837
    • ☆☆☆☆☆

    I would have said that for a lease you would have exclusive use of a predetermined area – e.g. the 20 square metres under the escalator.

    As always, the marks are for the knowledge. If your application differs, it’s not the end of the world.

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